Inheriting 2 leases for Duplex - Security deposit + Lease guidance

[Tasha Smith]

Hi All! My husband and I had an offer accepted on our first duplex. They are currently occupied with tenants until March 2025 and we are in due diligence reviewing the leases. For the security deposits - since we will take over is the seller required to transfer those funds to us? If we notice something that isn't in the lease that we feel is important, can we add an addendum or if we agree to "as is" is that also the lease or just the property? If we want to make upgrades to the units while our tenants are in there and negotiate an increase in rent when the lease terminates - suggestions on an appropriate way to do that? Any advice or tips on taking over a lease would be greatly appreciated - specifically around questions to ask before close, mistakes, and best practices. Thank you!!

[Nathan Gesner]

Yes, you may be screwed if the Seller is a cheat. Your offer should have included a requirement that the Seller transfer all tenant documents (application, payment history, lease, addenda, etc.), spare keys/openers/codes, prorated rents based on the day of closing, security deposits, and anything else pertaining to the rentals and tenants. It's not too late to ask, but they could refuse your request if they are sticklers.

Your offer to purchase should also include a requirement that the Seller agree to sign an estoppel certificate (also called an estoppel form or agreement). The estoppel is a form filled out by the tenant, then confirmed by the Landlord, and then accepted by the Buyer. It's supposed to ensure there are no surprises after closing. For example, I often see Buyers purchase property thinking there is a $1,000 deposit but then the tenant claims it was $2,000 because they paid the last month's rent. How will you know? An estoppel certificate fixes this problem.

Some things it may include:
1. Tenant name, contact information, and address
2. Occupancy date
3. Is there a written lease? If so, review it to ensure it matches the estoppel certificate
4. Are there any modifications to the written lease?
5. Are there any verbal agreements or arrangements between the current Landlord and Tenant?
6. Current lease term (expiration date, month-to-month)
7. Current rent rate
8. Rent due date
9. Security deposit amount
You can find plenty of examples by searching for "tenant estoppel certificate doc" or exchanging "doc" with "pdf" for more options.

Here is an example and explanation: Sample Estoppel

Some have a lot of legal jargon but this document does not need to be so detailed. This is an essential tool for anyone buying a tenant-occupied property.